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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
The PNC Financial Services Group, Inc in Focus
Headquartered in Pittsburgh, The PNC Financial Services Group, Inc (PNC) is a Finance stock that has seen a price change of -18.17% so far this year. The company is paying out a dividend of $1.5 per share at the moment, with a dividend yield of 3.66% compared to the Banks - Major Regional industry's yield of 3.47% and the S&P 500's yield of 1.62%.
Looking at dividend growth, the company's current annualized dividend of $6 is up 25% from last year. In the past five-year period, The PNC Financial Services Group, Inc has increased its dividend 4 times on a year-over-year basis for an average annual increase of 13.56%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. The PNC Financial Services Group, Inc's current payout ratio is 42%. This means it paid out 42% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, PNC expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $14.43 per share, representing a year-over-year earnings growth rate of 1.76%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, PNC is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report
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